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Amid the tide of red ink flowing from many of the world's largest banks
these days, big profits seem out of fashion. On Tuesday alone, Deutsche Bank announced its first quarterly loss in five years, while HBOS, the U.K.'s
biggest mortgage lender, said it would replenish its depleted coffers with
an $8 billion share sale. Both firms announced billions of dollars of fresh
write-downs.

But you just can't keep Big Oil down. Trouncing analysts' expectations
Tuesday, BP and Royal Dutch Shell, Europe's largest oil companies, delivered
record profits for the first quarter of 2008. Anglo-Dutch firm Shell netted
$7.78 billion in the first three months of this year, up 12% over the same
period in 2007. Profits at rival BP, meanwhile, swelled by almost half to
$6.59 billion. Shares in each firm climbed almost 5% on the news.

At the heart of that growth for both companies were bumper profits from
exploration and production units. Those at Shell's climbed 52% to more than
$5 billion, and BP's did even better. But given the surging price of a
barrel of oil, both businesses must share the plaudits with the markets. A
spiraling dollar and jitters over supply have helped drive oil prices up
almost a quarter this year, reaching a fresh record of almost $120 on
Monday. An end Tuesday to the two-day strike over pensions by refinery workers in
Scotland  which had earlier halted much of the North Sea's oil production
and wreaked havoc with gas supplies in Scotland  won't do a nervous market
any harm. But there's little sign of oil prices easing significantly in the
short-term; Chakib Khelil, president of OPEC, the oil producers' cartel,
admitted Monday he couldn't rule out prices hitting $200.

That's good news for shareholders in the likes of BP and Shell. But results
like these can rankle consumers caught up in a cooling economy as gas prices
at the pump steadily rise. Little wonder that results like these aren't
trumpeted these days, but rather carefully explained. Record profit
announcements from major energy firms are nothing new; those inflated oil
prices have triggered a string of them in recent months. But the slowdown
currently underway in the U.K., for instance, "puts a bigger onus on these
companies to explain lucidly what exactly that means," says Simon Webley,
research director at the Institute of Business Ethics in London, which
counts both BP and Shell as supporters. Petrol retailing, for instance,
accounts for "very little of their profits," he says, "mainly because of the
huge tax take from that. They will also have to point out the prices of
investing in new resources is very capital intensive."

Sure enough, Royal Dutch Shell Chief Executive Jeroen van der Veer limited
himself to calling the results a "competitive set of earnings." And he was
quick to point out that "Shell has the largest capital spending program in
our industry today, to ... play our part in ensuring that energy markets
remain well supplied." That slight air of defensiveness is easy to
understand. Where corporate profits are concerned, "everybody thinks it
goes into the pockets of senior people," says Webley. "That is far from the
case." The suggestion is that Shell and BP's profits will be plowed back
into exploration rather than into, say, London's real estate market, which
has been goosed up for years by bonuses from the now hurting financial
sector. It's an important distinction, but it may not be enough to placate
everyone.